Research On Managerial Ownership,Financial Decision And Financial Performance

This paper investigates the impact of managerial ownership onthe financial decision and financial performance on the basis of the Chinese institutional environment.The main content includes two parts,i.e.,theoretical study and empirical study.In part of theoretical research,the paper focuses on the essences of beyond property-rights theory,and discusses the impact of the external market competition mechanism on corporate governance structure and the corporate performance with depth and detail.Although the management ownership is just taken as one case of equity incentive,the process of theoretical analysis and deductions provides a new comprehensive perspective for the governance effect of managerial ownership.From this perspective,the paper provides a systematic framework to grasp the appropriate situations for the implementation of the equity incentive mechanism.The equity incentive mechanism is an equilibrium of incentive compatibility mechanism under the interaction of an internal governance and external market competition.The effectiveness of equity incentive depends on the specific institutional environment of the listing corporation inevitably.In part of empirical research,the paper selects an unbalanced panel data set comprised of Chinese non-financial companies from 2007 to 2011 listed in Shanghai and Shenzhen as sample.From different perspectives of institutional contexts,the paper carries empirical tests on governance effect of managerial ownership which acts on the efficiency and performance of financial decision,including production efficiency,the efficiency of investment,dividend payment and finanacial performance.The main empirical findings are as follows:1.The paper makes an estimate of the enterprises efficiency by applying a stochastic frontier model firstly.Taking into consideration of ownership nature of listed companies,the paper relates the corporate efficiency to the managerial ownership.The results show that:(1)the corporate efficiency of the average sample company is around 76.4%;the average corporate efficiency between state-owned companies and private companies does not differ significantly.(2)On the whole,there is an inverted U-shape curve between managerial ownership and corporate efficiencies.(3)The effects of managerial ownership acting on corporate efficiency differ in ownership nature:the managerial ownership of private companies reflects a stronger convergence effect.2.According to government level,the state-owned enterprises(SOE)were divided into two groups,which are the central government and the local government.Referring to the model presented by Richardson(2006),the paper makes an estimate of investment efficiency in the sample companies.Taking into consideration of government level of listed companies,the research is based on the institutional background of the reform of administrative system and the adjustment of the deploy plan for the state-owned assets currently.This paper relates the managerial ownership to the investment efficiency.The results show that:(1)The managerial ownership prompts the improvements of investment efficiency significantly on the whole for the state-owned enterprises(SOE).(2)The improvements is more significant for listed companies controlled by the central government than those controlled by local government.Under two cases that investment inefficiency has been divided into,i.e.,under-investment and over-investment,the above two conclusions are still robust.3.Taking into consideration of the mechanisms of external market competition,the paper tests the effect of managerial ownership acting on the dividend distribution(including the quota and tendency)by applying the Tobit model and the Probit model.The main evidences indicated that:(1)there is an inverted U-shape between managerial ownership and dividend payments(or dividend policy),this relationship means that,other things being equal,for instance,the free cash flow,investment opportunities and the cost of financing are under the same condition,in a certain range,the higher the management ownership is,the greater tendency and strength of dividend payments;and once it exceeds a critical value,its increasement reduces the possibility and the quota of the dividend distribution instead.(2)the market competition intensity have significant influence on the relation between managerial ownership and dividend payments.The specific way of the influence lies in:when the market competition intensity increases with the managerial ownership,the possibility and the quota distribution increase;when the degree of monopoly increases with the managerial ownership,the possibility and the quota distribution decrease on the contrary.As an external governance mechanism,market competition plays a certain role.4.Investigating the relationship between managerial ownership and corporate performance by considering the endogenous nature of the ownership variable.We make theoretical analysis by introducing the vector of market competition intensity based on beyond property-right argument framework.We conduct our empirical analysis by applying simultaneous equations models.The main evidences indicated that:(1)when managerial ownership is treated as endogenous;there are an inverted U-shape incentive effect and a market-competition-intensity-moderating effect of managerial ownership on corporate performance.(2)The specific way of the moderating effect lies in,when the market competition intensity increases,the convergence effect of managerial ownership enhances;when the degree of monopoly increases,the entrenchment effect of managerial ownership aggravates.In conclusion,this paper carries the research based on the specific institution environment of transitional economy in China.From the theoretical perspectives of property-rights and beyond property-rights,the paper investigate the governance effect of managerial ownership that act on the allocation efficiency including the production efficiency,investment efficiency and dividend distribution.The empirical findings contribute not only to enriching the current literatures,but also to understanding the mechanism arrangements of equity incentives and policy orientations of government regulation.